3 Threats to UC Industry Momentum

3 Threats to UC Industry MomentumA strong market push by Google, an economic downturn, and the rise of mobile UCaaS -- if they materialize -- could all dampen existing players’ strong prospects.

A strong market push by Google, an economic downturn, and the rise of mobile UCaaS -- if they materialize -- could all dampen existing players’ strong prospects.

Confidence was in the air at Enterprise Connect 2018 -- a detectable swagger throughout the conference among the vendors as well as the attendees. And why not? The economy is strong, and sales are up. Lots of end users were in attendance this year, presumably shopping for new solutions.

Enterprise Connect 2018 beat past records in terms of both exhibitors (more than 200) and attendees (over 6,400 total). It's all good news except for one nagging thing: Economies and sectors have cycles. Market conditions will indeed change, and possibly quite suddenly. Predicting change is the easy part; nailing the timing is hard.

What could possibly go wrong? I can see three threats to the health of the industry on the horizon:

Google
For about a decade now, Google's expansion into telephony has been cooking on a low burner. That expansion seemed inevitable back in 2007 when Google acquired Grand Central. There have been plenty of false starts along the way, but so far Google's been distracted with just about everything but enterprise voice (for more history, see Google to Get Into UCaaS). Still, G UCaaS, or whatever they wind up calling it, seems likely to emerge this year.

The Google Cloud business consists of the G Suite productivity apps and the Google Cloud platform-as-a-service. Cloud has grown into a billion-dollar-per-quarter business, and that includes 4 million paid subscriptions to G Suite. Separate G Suite editions exist for education and government, and according to Reuters, subscriptions are growing quickly.

The vendor landscape for enterprise communications changes frequently -- companies come and go -- but Google isn't just another vendor. It's a behemoth, with a strong brand and existing user base. A true UCaaS service would give it a comprehensive communications portfolio unlike any other vendor (even Microsoft), including:

In Google's EC18 Industry Vision address, Diane Chaleff of the Google Cloud Office of the CTO focused on meetings and collaboration, and provided a glimpse into how machine learning, combined with integrated services, could "hide the [workday] junk and maximize human ingenuity."

Google's entry into UCaaS, assuming it happens, will certainly impact the marketplace. Likely all providers will feel the competitive pressure, and small providers may disappear.

Economy
But pressure may not require the entry of a large new competitor. It could come from a general economic turn or political event. There's an argument that we are due for a shift, as the economy has been growing steadily since mid-2009, for 105 months. This summer the U.S. could break the record of sustained economic expansion it set back in the 1960s.

Ray Dalio, the billionaire investor who predicted the 2008 financial crisis, said last month that a recession is likely before 2020. He believes the U.S. economy is in a "pre-bubble stage," but warned it could quickly morph into a bubble -- "followed by a bust."

Additional red flags came from a Bank of America Merrill Lynch poll last month where the majority of investors expressed the belief that the current global economic expansion is in "late cycle" -- the highest percent since January 2008 (i.e., pre-Great Recession). Also, the CBOE (Chicago Board of Exchange) Volatility Index (VIX) recently increased after years of record lows.

Enterprise communications are highly sensitive to economic factors. Projects get canceled, assets get sweated, and services get reduced. When the economy contracts, wallets close. The impacts are felt by manufacturers, providers, channel partners, and of course the customers that are suddenly tasked with doing more with less (staff and/or budget).

Mobile-UCaaS
For a decade now, the UC/UCaaS industry has embraced the smartphone. Mobility, via mobile apps, has been a key driver for PBX-to-UC upgrades. But what if the mobile carriers figure out UC on their own?

There have been various attempts to bring PBX features to mobile services. BroadSoft has been successful in attracting several major mobile providers to integrate to its enterprise calling platform. The result is services that combine wireless and wired devices into a single business service.

Cisco no doubt plans to continue marketing that service to mobile network operators with its acquisition of BroadSoft -- but they're not the only player in this game. Recently Metaswitch and Mavenir have also introduced products that enable business calling features for mobile providers. Mavenir was actually at Enterprise Connect between UCaaS exhibitors -- a wolf among the sheep?

Mavenir recently introduced a mobile-native UCaaS designed for SMBs. Note, Mavenir is a key supplier to T-Mobile and facilitated the launch of T-Mobile's Digits service in 2016. Digits unbundled phone numbers from mobile devices. That's actually a core UCaaS capability, and Mavenir has evolved its technology with enterprise calling features.

Mobile providers' expansion into enterprise voice could have significant implications. Today, there are as many UCaaS providers as the market will bear; and may the better provider win. The number of mobile carriers is tightly controlled through regulation; nevertheless, as mobile providers expand in UCaaS, their success could come at the expense of existing UC and UCaaS vendors. .

Those are three scenarios that could rain on the enterprise communications parade. Of course, there could wind up being many more, as the industry is experiencing unprecedented change.

However, there's no definitive reason to expect the worst -- things might just remain swell for the foreseeable future.

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